Thursday, June 05, 2008

I Got Your Peak Oil Myth Right Here

This was written in response to the many cornucopians who think that a fall in oil prices means that peak oil is a hoax and it is time to dust off the Hummers.

Many in the peak oil community understand that one of the key symptoms of peak oil is high volatility.... in other words price spikes. And with spikes come dips. I would not be surprised if oil fell to $70. That doesnt mean it is going to stay there. And it definately doesnt make peak oil into a myth.

In order to prevent a peak, new production has to be brought online to replace the current 3~4 percent rate of depletion PLUS another 1.5% to allow for continued economic growth. That is over 4.5 million barrels a day that needs to be brought online to break us out of this plateau. That is one Saudi Arabia every 2 years. There is not one petroleum expert in the world who can tell you where all that oil is going to come from. Even IF the oil was found, there simply is not enough infrastructure (drilling rigs, qualified personnel, etc) to bring it online fast enough to ramp up production in time to offset current depletion rates. The current megaprojects have everything tied up. New rigs have to be built, new people have to be trained, and all of that takes too much time. And worst of all, the price premium on any rush order can be exorbitant. That rush to build more equipment and train more people... not to mention the energy and commodity costs to do so... THAT is what will drive oil to $300 and beyond.

Oil may drop in half to make Oblama look good for the cameras. Oil may drop to keep the focus of this election on watered-down issues. But it will not stay there until demand is destroyed. Obamanomics will ensure that this whole process accelerates.

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